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Budget 2018 - The Implications for Public Services

Briefing Paper

Phillip Hammond presented his 2018 budget on Monday 29th October. In it he announced the government’s spending, tax and borrowing plans from 2019/20 to 2022/13. It is of even more interest than usual to those of us who are involved in public services.

In his introduction to the budget, Philip Hammond said that the budget reductions that have been made since 2010 were necessary and not ideologically driven and that:

“The era of austerity is finally coming to an end.”

This budget provides for increased public expenditure and reduced taxation funded by continued government borrowing. The government’s macro-economic policy appears to be based or running a permanent government deficit as a way of compensating for low levels of demand in the economy caused by low exports and investment; coupled by encouraging households to borrow and spend rather than to save.

Most of the planned increases in public expenditure are in the National Health Service. The increases for other public services including local government, housing, the police and welfare are more modest and are increases when compared with previous plans. It must also be remembered that this is a time when there are significant budgetary pressures in most public services including health and social care, not least because of demographic changes. The planned increases in National Health Services budgets are considered by many in the sector to be insufficient to meet increasing need. The additional funds for local government are small when compared to the funding that has been lost since 2010, the funding gap that already exists and the service pressures that exist especially in adults’ and children’s social care. The details of how the lifting of the local authority housing ‘borrowing cap’ are still awaited. The planned reductions in welfare budgets of £17billion are apparently still to be implemented. Whether this represents an end to austerity is probably a matter of opinion rather than a matter of undisputed fact! What is an undisputed fact is that balancing the budget over the term of the economic cycle (which was the ‘Golden Rule’ of public finance from 1997 to 2008) is no longer an objective of the United Kingdom government. However, there are fears that continuing to accumulate public debt that is already at record levels is unsustainable.

The budget is also based on a series of assumptions that may not be borne out in practice. First, the international economy is showing signs of instability with ‘trade wars’ and fluctuating stock markets across the globe; and second, the budget assumes that Brexit will not have a significant negative effect. If these assumptions turn out to be incorrect there will be a further budget. I expect I will be writing another briefing paper on the United Kingdom government budget in the spring of 2019!

The purpose of this briefing paper is to summarise the implications of the budget for public services, the reactions to it from the sector and to provide some commentary.

After posting this briefing paper, I was contacted by a Housing Association Chief Executive who told me:

"That's a great analysis of the budget"

To view or download your copy, please click here.

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